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The South African government will provide seed funds to cover certain restructuring costs for the country’s insolvent airline, Public Business Minister Pravin Gordhan said.
South African Airways needs around R10.5 billion ($ 650 million) to restart. Funds are needed for workers’ compensation packages, to pay creditors and cover operating costs, the minister said in response to questions from Bloomberg News.
“The issue of money from the government side will be resolved next week at scheduled meetings, but the compromise has been resolved,” Gordhan said by email.
While the government has been considering different options and reaching out to institutions and lenders to secure funding, it may have to put up some money from state coffers to save South African Airways and secure a future equity partner deal.
“The equity partner process will still take a little time. That is later. Right now money is needed for restructuring costs, ”said the minister.
Distraction
SAA was put into management in December, has not made a profit since 2011 and relies on state donations.
Keeping it afloat is seen by opposition parties and some analysts as a distraction for the government at a time when it needs to bail out the most crucial state power company and revitalize growth in an economy preparing for its biggest contraction. annually in nine decades.
Finance Minister Tito Mboweni has previously indicated that the government does not have the money available to bail out SAA and said it would help “mobilize” funds from other sources.
However, a “reprioritization” of funds could be implemented in the 2020 budget to cover restructuring costs, according to Gordhan.
Twenty private sector donors, private equity investors and partners have submitted unsolicited expressions of interest in a restructured SAA, and those are being evaluated, the Department of Public Enterprises said.
Ethiopian Airlines Group is in talks with SAA to provide assistance, people familiar with the situation said. The Addis Ababa-based airline is seeking control, possibly in the form of a management contract, and that may be a sticking point, the people said.
Read: SAA will not be liquidated: government
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